State agencies are gearing up to handle a surge in unemployment claims from former federal workers as the Trump administration’s mass layoffs threaten to bog down systems and delay payments to everyone eligible for unemployment insurance benefits.
If states become overwhelmed by federal claims, which take longer to process than private sector claims, “they’re going to be slower at paying people who get laid off in what is, maybe, starting to look like an economic downturn,” said Michele Evermore, a senior fellow at the nonprofit National Academy of Social Insurance.
Tens of thousands of federal workers nationwide have been fired, laid off or taken buyouts since President Trump took office. That includes people who have been fired and then rehired and people whose jobs are in limbo in the midst of court fights.
Federal agencies last week sent the White House their plans for additional downsizing.
Processing a wave of claims from former federal workers will “absolutely” require more resources, said Maryland Secretary of Labor Portia Wu. “We are in the midst of hiring more people, training more people. We’re going to seek to have some sort of reserve capacity to answer the phones.”
Over 1,000 former federal workers have filed for unemployment benefits in Maryland since Trump took office, according to the state labor department, ten times the number who filed over the same period last year.
It’s impossible to say how many federal employees will ultimately lose their jobs in Maryland. But Wu said the worst-case scenario could be an almost unprecedented spike in unemployment.
“It could be very substantial,” she said.
Before providing someone with unemployment benefits — money to help them pay the bills while searching for a new job — state officials must determine if that person is eligible and the level of benefits for which they are eligible.
State rules vary, but claimants must have been employed for a certain amount of time and earned a certain amount of money prior to losing their jobs. They must also be unemployed through no fault of their own. States set eligible workers’ benefit amounts based on their prior wages.
It is relatively easy to process a private sector worker’s claim, unemployment insurance experts and state officials say.
That’s because private employers file wage reports when they pay state taxes that fund unemployment insurance benefits. They are already signed up for an online system that allows states to quickly verify former employees’ pay and ask for additional information.
“For a private-sector worker, it’s pretty much automated,” said Andrew Stettner, director of economy and jobs at the Century Foundation, a progressive think tank.
The federal government doesn’t do any of that. Instead, when a former federal worker files a claim, state officials must reach out to the relevant agency to confirm that person’s eligibility and prior income. It is a time-consuming process even when agencies follow established protocols for letting people go.
The Trump administration and Elon Musk’s DOGE team haven’t always followed the rules. Workers have been fired on shaky grounds, offered buyouts that could be interpreted as a pretext for layoffs, and let go without official termination letters. Whole agencies have been eliminated or gutted.
“It’s a by-hand wage verification system at a time when the whole federal government is in chaos,” Stettner said of processing unemployment claims filed by former federal workers.
In many cases, state officials reviewing unemployment claims must now spend extra time figuring out why a worker lost their job — a judgement call that will affect whether they qualify for benefits.
“There’s a lot of extra work that needs to be done by our more experienced adjudicators working the claims,” said JR Richards, director of insurance services for Washington state’s Employment Security Department. “Is this a quit? Or a termination?”
Richards gave the example of a remote federal worker who lost his or her job because he or she did not return to the office as Trump ordered.
“On the surface, that looks like you chose to quit. You didn’t do everything in your power to keep your job,” Richards said. But if that person worked under a contract that allowed them to telework, the situation becomes less clear.
Lawsuits further complicate the situation. Two judges last week ordered the Trump administration to rehire probationary workers fired last month, saying the workers were fired unlawfully. White House press secretary Karoline Leavitt said Friday that the court orders are unconstitutional and the administration will appeal them.
Some federal workers who lost their jobs under Trump don’t have all the paperwork they need to file for unemployment, said Jaqueline Simon, policy director for the American Federation of Government Employees, a union that represents federal workers.
“They got cut off from their access to their email and their employment records,” Simon said. She said some workers have found “there’s nobody working in the offices that they need to visit to even get hard copies of their records.”
States are already seeing an uptick in unemployment claims filed for former federal workers, and officials expect the number to increase.
Over 1,000 former federal workers have filed for unemployment in Washington state so far this year, Richards said. That’s about twice as many as over the same period last year.
Typically, three people on Richards’ team handle a mix of federal and private-sector unemployment insurance claims.
Now those officials are fully focused on federal claims and the agency is training 15 more people to join them.
“That’s to start,” Richards said. “And again, we’ll keep an eye on how these claims are coming in, and if we need to do more.”
The federal government provides states with funding to run unemployment insurance programs, but state agency leaders have argued for years that the money is woefully inadequate. Some states help fund their programs.
Both Maryland’s Department of Labor and Washington’s Employment Security Department this year have asked state lawmakers for more money to support unemployment insurance programs. In both cases, agency leaders submitted their proposals before federal layoffs began.
The Maryland Department of Labor has asked lawmakers to impose a 0.15% fee on private sector employers to raise money for program administration. The fee would be offset by a 0.15% reduction in the unemployment insurance tax rate employers pay.
“We certainly think we need at least that level of support,” Wu said. “But frankly, we’re going to have to see how things unfold.”